42 Rules of Money Ep 481

Summary Notes


In this episode of the podcast "The Game," the host documents his journey to building acquisition.com into a billion-dollar portfolio, sharing 42 key beliefs about money that contributed to his success. He emphasizes the importance of frugality, innovation, and the power dynamics of giving versus receiving money. He discusses the value of reputation, the differences between money and wealth, and the significance of speed in business versus patience in wealth-building. The host also touches on the importance of financial self-sufficiency, risk management, and the concept that money flows to those who pay it the most attention. He advises aligning personal and business financial practices, ignoring poor financial advice, and understanding that money is not a zero-sum game. The host further explores the necessity of trust in business dealings, the value of long-term investments, and the advantage of focusing on one area of expertise. He concludes with the notion that peace of mind has a price and diversification can also be considered vertically within the capital stack.

Summary Notes

Frugality as a Catalyst for Innovation

  • Imposing constraints on resources and time can drive creative problem-solving.
  • Frugality should be practiced even in the presence of abundant funds.
  • The act of limiting oneself can lead to innovative solutions that aren't reliant on financial expenditure.

"Frugality drives innovation. Constrain, constrain, constrain. Even when you have money, one of the best things to do, in my opinion, is to constrain your resources, constrain time, because it'll force you to think creatively, to solve problems without using money as the solution."

The quote emphasizes the value of self-imposed limitations to foster creativity and innovation, suggesting that even with sufficient resources, creating constraints can lead to more effective problem-solving.

Wealth Perception and Business Approach

  • Wealthy individuals often view business as a strategic game.
  • The speaker aims to share lessons from their journey in building a successful portfolio.
  • The goal is to help others grow their businesses and potentially collaborate on achieving significant financial milestones.

"The wealthiest people in the world see business as a game. This podcast, the game, is my attempt at documenting the lessons I've learned on my way to building acquisition.com into a billion dollar portfolio."

The quote outlines the speaker's perspective on business as a competitive and strategic endeavor, likened to a game by the wealthiest, and sets the stage for the podcast's purpose to share valuable business insights.

Power Dynamics in Financial Transactions

  • The giver of money holds more power than the receiver.
  • Financial power allows the giver to set terms and essentially "own" the receiver.
  • This concept applies to banks and the dynamic between customers and service providers.

"He who gives the money has the power, not the one who takes it."

The quote encapsulates the idea that in financial exchanges, the party providing the funds has greater control and influence over the terms and conditions of the transaction.

Reputation vs. Money

  • Reputation is more valuable and less recoverable than money.
  • A strong reputation can compound over time, creating a competitive advantage.
  • Sacrificing reputation for short-term financial gain can disrupt long-term compounding benefits.

"Never trade reputation for money, because you can get money back, but you can't get reputation back."

This quote highlights the irreplaceable nature of reputation compared to money, suggesting that it is a long-term asset that should not be compromised for immediate financial returns.

The Dynamics of Money, Wealth, and Poverty

  • Quick action aligns with making money, while building wealth requires patience.
  • Compounding wealth is a process that should not be interrupted.
  • Indecision is associated with poverty, as it prevents both wealth creation and quick financial gains.

"Money loves speed. Wealth loves time. Poverty loves indecision."

The quote distinguishes between the behaviors associated with earning money rapidly, accumulating long-term wealth, and the stagnation caused by indecision, which is linked to poverty.

Abundance Mentality and Financial Security

  • Believing that one can always make more money than needed fosters a sense of security and abundance.
  • Operating from a place of non-need grants leverage and power in negotiations and decision-making.
  • This belief has been beneficial to the speaker and their spouse.

"We can always make more money than we need."

This quote conveys an abundance mentality, suggesting that with the right skills and mindset, financial security is always attainable, which in turn influences one's approach to business and life.

Risk Management in Wealth Creation and Preservation

  • Taking significant risks with little money can lead to fortune creation.
  • Once wealth is established, it should be preserved by taking minimal risks with the accumulated wealth.
  • The behavior towards risk must evolve as one's financial situation changes.

"Fortunes are made by taking a lot of risk with a little bit of money, and fortunes are maintained by taking a little bit of risk with a lot of money."

The quote explains the different approaches to risk at various stages of wealth accumulation, emphasizing the need for aggressive risk-taking in the initial stages and a more conservative approach once substantial wealth is achieved.

Focus and Attention in Financial Success

  • Concentrating attention on a single endeavor can lead to financial success.
  • Diluting focus across multiple interests can hinder progress.
  • The analogy of using a magnifying glass to concentrate the sun's rays symbolizes the power of focused effort.

"Money flows where attention goes."

This quote suggests that directing one's focus and energy towards a particular area, such as a business venture, increases the likelihood of financial success in that domain.

Alignment of Personal and Business Finances

  • Consistency in financial practices at home and in business is essential.
  • Living a lavish lifestyle while trying to reinvest in a business creates misalignment and potential conflict.
  • The speaker practices the same financial rules in both personal and business life to maintain harmony.

"Your home life and your business life have to be aligned money wise."

The quote stresses the importance of having consistent financial principles across personal and business aspects of life to avoid conflict and ensure long-term stability.

Discernment in Financial Advice

  • Financial advice should be sought from those who have achieved the level of success one aspires to.
  • Ignoring advice from those who haven't reached or surpassed one's financial goals is recommended.
  • The ability to accurately perceive reality is a trait of successful individuals.

"Ignore money advice from poor people."

This quote advises against taking financial guidance from individuals who have not achieved the level of wealth one is aiming for, as their perspective may not be aligned with the realities of attaining such success.

The Ease of Buying vs. Selling

  • Entering transactions, such as stock purchases, is generally easier than exiting them.
  • Caution should be exercised when making purchases, while facilitating ease in selling.
  • Discipline is vital in the buying process to avoid impulsive decisions.

"It's always easier to buy than to sell."

The quote underscores the asymmetry between the ease of acquiring assets versus the potential challenges of liquidating them, highlighting the need for careful consideration before making financial commitments.

The Nature of Money

  • Money is described as fickle and jealous, gravitating towards those who give it the most attention.
  • Wealth tends to accumulate with individuals who focus on its management and growth.
  • Others may only temporarily possess money without paying it sufficient attention, leading to its eventual redistribution.

"Money is fickle. Money is jealous. It sticks and goes to the person who pays it the most attention."

This quote personifies money, suggesting that it favors those who actively manage and prioritize it, ultimately accumulating with a select few who maintain this focus.

Attention to Money

  • Money tends to accumulate with those who pay it the most attention.
  • Paying attention to finances is a key aspect of wealth accumulation.

"And so if you pay the most attention to the money, you're the one who it will end up sticking to, because it always loves the person who."

This quote emphasizes the importance of focusing on financial matters to ensure money sticks with you.

Lessons from Poverty

  • Poverty is like a boss level in a game; you must learn the lessons it teaches to progress.
  • Lessons include action-taking, personal finance, saving, increasing skill sets, and solving problems for others.
  • Overcoming poverty requires learning and applying these lessons.

"We stay poor until we've learned all the lessons that poverty has to teach."

This quote suggests that poverty provides critical lessons which, when learned, can help overcome financial hardship.

Frugality and Innovation

  • Frugality and constraints can drive innovation.
  • Limiting resources forces creative problem-solving.
  • Constraints should be seen as advantages, not disadvantages.

"Frugality drives innovation. Constrain, constrain, constrain."

The quote highlights the benefit of resource constraints in fostering innovative thinking and problem-solving.

Investment vs. Spending

  • Differentiate between investing (which yields returns) and spending (which consumes resources).
  • Apply more discipline to spending than to investing.
  • Recognize that investments can lead to compounding returns.

"Think once before investing. Think twice before spending."

This quote advises careful consideration before spending money, while encouraging thoughtful investment.

Money and Power

  • Money flows to those who need it the least because they have leverage.
  • Having options and not needing money gives one power.

"Money flows to the person who needs it the least."

The quote illustrates the paradox that those who are less in need of money often find it easier to accumulate more wealth.

Self-Worth and Net Worth

  • Self-worth should not be tied to net worth.
  • Value lies in one's ability to generate wealth, not the wealth itself.
  • External events can strip away material wealth, reinforcing the importance of intrinsic value.

"We make money. Our money does not make us."

This quote differentiates between generating money and allowing money to define one's value or identity.

Opportunity Selection

  • Not every opportunity is the right fit for an individual.
  • Learning to say no is important to avoid overcommitting and poor decisions.
  • Recognizing and articulating when an opportunity isn't suitable can prevent long-term issues.

"It may be an amazing opportunity, but not our amazing opportunity."

The quote conveys the importance of discerning which opportunities align with one's personal goals and circumstances.

Control Over Money Flow

  • Controlling the flow of money provides leverage and power.
  • Being upstream in the flow of money allows for greater influence and control.
  • Positions of control in the flow of money are advantageous.

"We control the money flow wherever possible."

This quote underlines the strategic importance of positioning oneself at a point in the financial chain where one can exert the most control.

Importance of a Safety Fund

  • Maintaining a safety net fund allows for taking calculated risks.
  • Having a financial cushion provides peace of mind and enables more aggressive strategies.
  • The fund should be kept in low-risk investments, despite potential losses due to inflation.

"Always having a shit fund."

The quote stresses the significance of having a financial backup to support risk-taking and provide security.

Ignorance and Wealth Erosion

  • Ignorance is the most significant eroder of wealth, followed by taxes.
  • Not knowing how to generate wealth costs individuals potential income.
  • Investing in knowledge and skills can mitigate the cost of ignorance.

"The biggest eroder of wealth is ignorance."

This quote identifies lack of knowledge as the primary obstacle to wealth accumulation, emphasizing the value of education and skill development.

Value Creation and Negotiation

  • Wealth is generated by creating value, negotiating effectively, and being irreplaceable.
  • The formula for making money involves these three factors.
  • Unique skills and negotiation improve one's financial position.

"You get paid for the value you create times your ability to negotiate divided by how hard you are to replace."

The quote presents a formula for understanding how money is made, highlighting the importance of value creation, negotiation skills, and uniqueness.

Decision-Making and FOMO

  • Fear of missing out (FOMO) can lead to rushed and irrational decisions.
  • Pausing and reflecting when experiencing FOMO can prevent mistakes.
  • Deliberate decision-making is key to avoiding errors.

"Mistakes love a rush decision."

This quote warns against the dangers of making hasty decisions, particularly when driven by FOMO, advocating for a more measured approach to decision-making.

Cooldown Periods and Financial Decisions

  • Cooldown periods prevent impulsive decisions, saving money and protecting reputation.
  • Taking time to reflect can lead to better judgement and avoidance of poor deals.

a cooldown period. And so it's just one of those easy beliefs that has slowed me down and has saved me so much money from mistakes.

This quote emphasizes the value of taking a pause before making financial commitments to avoid costly errors.

Leverage in Negotiations

  • Leverage is gained by not having a dependency on others or their offers.
  • Reducing or satisfying personal needs eliminates others' influence over you.
  • Both monks and wealthy individuals achieve leverage, monks by needing nothing and the wealthy by satisfying all needs.

Leverage comes from not needing the other person, and more specifically, leverage comes from needing nothing.

The quote highlights the concept that true leverage in any negotiation comes from a position of not having dependencies.

Market Dynamics

  • Market corrections often take longer to manifest than anticipated.
  • Once adjustments occur, they happen rapidly and can be drastic.
  • Patience and comfort with discomfort are necessary for market investors.

Markets take longer than you expect, and then they move faster than you can imagine.

This quote captures the unpredictable nature of market movements and the importance of being prepared for sudden changes.

Money as a Game

  • Wealthy individuals view money as a game and focus on personal financial achievements.
  • Regular monitoring of finances, like in a game, can lead to improvement.
  • The perspective on money changes as wealth increases, with less frequent checks needed at higher net worth levels.

Money is a game. Treated as such, you can't win the game if you don't know you're playing one.

This quote suggests adopting a gamified approach to managing money can make financial growth more engaging and successful.

Risk Management

  • Avoid risking everything for a single opportunity, regardless of its potential.
  • Warren Buffett's advice on risk is cited, emphasizing the importance of preserving the core wealth.

Don't bet the empire for a pot of gold.

The quote reflects the principle of not jeopardizing one's entire wealth for a single, potentially lucrative deal.

Starter Deals with New Partners

  • Begin partnerships with small, low-risk deals to build trust and assess compatibility.
  • Investing is long-term, and trust is built over time.
  • Starter deals help diversify risk and reveal a partner's reliability.

Always do a starter deal with new faces.

This quote advises initiating new business relationships with small-scale deals to mitigate risk and evaluate the partner's trustworthiness.

The Value of Trust

  • Trust is a key component in business and investing, enabling faster and more frequent deals.
  • Long-term relationships and maintaining trust can lead to greater cumulative returns than short-term gains.
  • Trustworthy networks provide continuous opportunities without the need for constant searching.

Trust is worth more than a bigger return.

The quote underscores the long-term financial benefits of building and maintaining trust over pursuing immediate, larger returns.

Money and Non-Zero-Sum Thinking

  • Money is not limited; the supply is fluid and can be created through mutually beneficial deals.
  • Collaborating with others can lead to larger gains than competing for existing resources.

Money is not a zero sum game.

This quote challenges the misconception that financial gain for one party necessitates a loss for another, advocating for collaborative wealth creation.

Negotiating Better Deals

  • Standard deals are rarely the best option; negotiating can lead to better terms.
  • Leverage and the willingness to walk away are crucial in securing favorable deals.
  • Asking for better terms is essential, as is the ability to reject inadequate offers.

Never take a standard deal. There's always a better one.

The quote encourages negotiation and the pursuit of superior deal terms, emphasizing the power of choice and assertiveness in business.

Expectations of Returns on Investments

  • Wealthy investors aim for exceptionally high returns, disregarding standard expectations.
  • High targets may lead to extraordinary success, whereas modest goals limit potential gains.

expect low risk, amazing returns.

This quote conveys that successful investors often set ambitious return goals, reflecting a mindset that significantly influences investment strategies.

Personal Investment Philosophy

  • Investing is personal and requires a unique approach for each individual.
  • Changing the way you frame investment questions can alter the way you find answers.
  • Focusing on the time it takes for an investment to double or triple can be more practical than aiming for a specific IRR (Internal Rate of Return).

"Don't think in IRR, which means internal rate of return. Instead, think in how long will this take to double? How long will this take to triple?"

This quote emphasizes a shift from traditional IRR thinking to a more tangible goal of doubling or tripling investments, making the process more intuitive.

Diversification and Expertise

  • Diversification can be a hedge against ignorance but may not be optimal for those with specialized knowledge.
  • Wealthy individuals often focus on mastering one area of investment to maximize returns.
  • Competing against specialists in any field requires a similar level of dedication and focus.

"Diversification is a hedge against ignorance, right? And it's only risky if you don't know what you're doing."

The quote suggests that diversification is less necessary for those with in-depth knowledge of their investments, implying that expertise can reduce investment risk.

Importance of Investment Terms

  • The terms of an investment often dictate the returns more than the price.
  • Understanding and structuring the terms of a deal is crucial for successful investing.
  • Conditions and fine print in agreements can significantly impact the outcome of an investment.

"Returns are in the terms, right? So you probably heard the saying, it's either your price and my terms or my terms and your price."

This quote highlights the significance of the terms in an investment or deal, suggesting that the conditions set within an agreement are where the true value lies.

Utilizing 'House Money'

  • Using 'house money' refers to investing with profits rather than principal, reducing the risk of loss.
  • Recouping the initial investment allows for more aggressive investment strategies without risking the original capital.

"Whenever possible, use house money."

The quote advises investors to take opportunities to invest with profits rather than their initial capital to minimize financial risk.

Downside Protection

  • Knowing how to retrieve your initial investment is a form of downside protection.
  • Understanding the exact process of recovering your money is essential for secure investing.

"Always know how to get your money back."

The quote stresses the importance of having a clear plan for retrieving one's investment to safeguard against potential losses.

Cash Flow Management

  • Cash flow is critical both personally and in business.
  • Personal cash flow is the amount saved after expenses, not just income.
  • Focusing on savings rather than earnings can lead to better financial health.

"Cash flow is king."

This quote underlines the importance of managing cash flow effectively, highlighting that savings, not just income, are key to financial success.

Investment Horizon

  • Long-term investment strategies, like buying with the intent to hold forever, can lead to significant wealth accumulation.
  • Imposing constraints on investment decisions can result in more thoughtful and profitable choices.
  • Patience in investing, or 'the weight,' is where the real money is made.

"Buy for forever."

The quote encapsulates the philosophy of investing with a long-term perspective, suggesting that patience and a limited number of well-considered investments can yield great returns.

Managing FOMO

  • FOMO (Fear Of Missing Out) should be a signal to slow down and evaluate investment decisions carefully.
  • Taking a long-term view can mitigate the effects of FOMO.
  • Learning from past investment mistakes is crucial to avoid repeating them.

"Fomo means go slow."

The quote advises investors to be cautious and deliberate when experiencing FOMO, as rushing into decisions can lead to poor outcomes.

Risk Management

  • Only invest money you can afford to lose.
  • Maintaining an emergency fund ('O shit fund') is a prudent financial strategy.

"If you can't afford to lose the money, then don't use the money."

This quote is a straightforward reminder to avoid risking essential funds, emphasizing the importance of financial safety nets.

Peace of Mind in Investing

  • Peace of mind has value and can impact investment decisions.
  • Avoid investments that cause undue stress or worry.
  • Insurance can be a tool to purchase peace of mind.

"Peace of mind can be bought and it can be sold."

The quote suggests that investors should consider the emotional cost of their investments and that peace of mind can be a deciding factor in financial decisions.

Diversification in the Capital Stack

  • Diversification isn't just about industry variety but also about the position within a company's capital structure.
  • Being a preferred creditor can offer a level of protection and priority in recouping investments.
  • Understanding vertical diversification can provide a strategic advantage during financial downturns.

"A lot of people think about diversification in terms of industry, but they don't think about it in terms of capital stack."

This quote introduces the concept of diversifying investments based on their position in a company's financial hierarchy, which can affect the security and priority of the investment.

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